HSBC's January flash PMI for China falls into contraction territory

HSBC’s flash purchasing managers’ index for the Chinese manufacturing sector dropped further in January to hit a six-month low.

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The bank put the index at 49.6 points for the month, compared with a final reading of 50.5 points in December, according to data it released on Thursday January 23.

The index is also lower than the market consensus of 50.3 points.

A reading below 50 points indicates a contraction.

“The marginal contraction of January’s headline HSBC flash China manufacturing PMI was mainly dragged by cooling domestic demand conditions. This implies softening growth momentum for manufacturing sectors,” Qu Hongbin, HSBC’s chief economist for the country, said.

“As inflation is not a concern, the policy focus should tilt towards supporting growth to avoid repeating growth deceleration seen in the first half of 2013,” he added.

The weaker economic data is not expected to have an impact on the country’s steel market, however. This is because most market participants have already started their Chinese New Year holidays, sources said.

“Actually I think the market could still trend downwards in the short term even if the data was positive, as dealers who are still in the market are generally willing to offload materials at lower prices before the holiday,” a Beijing-based analyst told Steel First.

Domestic hot rolled coil prices have fallen by a total of 30 yuan ($5) per tonne in Shanghai so far this week.

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